The present invention relates to analysis of trusts that have multiple beneficiaries whose interests mature in different time periods or under different conditions. In particular, we disclose automatic mapping of interests in one or more trusts, optionally subject to user confirmation, to long and short positions in financial or derivative interests that have expected payouts and costs that can be offset against underlying trust assets. The underlying assets and long and short positions in the mapped instruments can be attributed to various beneficiaries and subjected to various risk and investment analyses.
The problems of managing an institutional portfolio or an individual retirement account have produced a substantial body of literature regarding analytical techniques. Several Nobel prizes in economics have been awarded for advances related to portfolio theory. However, the analysis is not applicable when legal entities such as trusts are interposed between assets and beneficiaries. These entities typically are employed to split risks and benefits of asset ownership among beneficiaries according to goals set by the original contributor of assets to the trusts. Many times, the entities allocate interests to achieve efficient tax and transfer benefits. By tax benefits, we mean favorable tax rates when income is realized. By transfer benefits, we mean favorable gift or estate tax rates when assets are transferred.
The economic situation of beneficiaries is transformed by the legal structure of trust and other entities. The economic situation of any particular beneficiary cannot be derived directly from the underlying assets, due to the entities.
An opportunity arises to develop a system and method for reducing the complex situation of portfolios held by trusts and other entities for the benefit of multiple beneficiaries to one which can be evaluated for individual beneficiaries using portfolio analysis techniques typically applied to institutional or individual portfolios.